Crude Oil May Fall as Demand Wanes, Survey Shows (Update1)

March 14 (Bloomberg) -- Crude oil may fall next week on signs that U.S. inventories will rise as the slowing economy curtails fuel consumption.

Sixteen of 37 analysts surveyed by Bloomberg News, or 43 percent, said prices will drop through March 20. Thirteen of the respondents, or 35 percent, said futures will rise and eight forecast that prices will be little changed. Last week, 45 percent said oil would decline.

U.S. crude-oil stockpiles gained more than analysts forecast last week, the Energy Department reported March 12, as gasoline supplies jumped to the highest since 1993. Total implied fuel demand averaged 20.5 million barrels a day in the past four weeks, down 2.7 percent from a year earlier, the report showed.

``With the ongoing divergence between the weakening fundamentals and the rising price, we see clear elements of a bubble in the crude oil market,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``While that bubble may expand further before it pops, we definitely see less upward potential here against a growing downside risk.''

Energy and metals prices have surged over the past year as the U.S. dollar plunged, prompting investors to seek a hedge against inflation.

Crude oil for April delivery rose $5.06, or 4.8 percent, to $110.21 a barrel this week on the New York Mercantile Exchange. It was the biggest weekly gain since the week ended Oct. 19. Futures reached $111 a barrel yesterday, the highest price since trading began in 1983.

Analysts had forecast that prices would drop for the past nine weeks. They were correct in two of those weeks. The oil survey has correctly predicted the direction of prices 51 percent of the time since its introduction in April 2004.

     Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                    RISE      NEUTRAL    FALL
                     13         8         16

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.